Friday Letter: How are those term sheets looking?

In these uncharted times, firms are rewriting term sheets and valuations are dropping. How will that impact current era funds?

Your covid-19 quote of the week comes from Kelly DePonte of Probitas Partners, who said during a recent webinar in regard to the economic consequences of the pandemic: “If you’re a 2017 vintage fund and you have put out a lot of money already, those portfolios might be problematic.”

That mirrors a lot of what we at Venture Capital Journal are hearing from talking with GPs and LPs, who say that fundraising is still taking place. But recent vintages may get hammered as sources tell us valuations are coming down.

Along with that, we’ve heard anecdotally of term sheets rescinded and redrawn.

Click here to see more about Venture Capital Journal’s coverage of covid-19 and its impact on VC

One San Francisco VC shared with us that he saw a term sheet in recent weeks go from a $100 million valuation to $60 million.

Sheel Mohnot of 500 Startups has also tweeted about this.

First off, I may be naive here, but I didn’t realize that term sheets could be redrawn. But I suppose the covid-19 era means that even legal documents can be scrubbed in the name of panic. Perhaps that is only being done by non-traditional VCs and crossover funds.

The point of DePonte’s quotation is not just about how funds a few years old could be in for dire straits as the valuations of their portfolio companies get marked down. It also means that funds that recently close or are able to secure commitments this year are expected to do well because pricing is so investor-friendly.

I would love to hear how covid-19 is impacting you. Are you seeing term sheets being rewritten or are VCs honoring recent deals? Share with us at agoldfisher@buyoutsinsider.com.